Thursday, March 12, 2009

FDIC and Congress a case of Dumb and Dumber

If you are concerned about the way Congress is spending our taxpayer money this won't boost your confidence.
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The Federal Deposit Insurance Corporation is facing a potential major shortfall in funding because it collected no insurance premiums from most banks from 1996 to 2006.
If you are not familiar with the FDIC, this is the federal agency which insures deposits in banks up to $250,000.The agency stopped collecting insurance premiums from banks because,
Congress believed that the fund was so well-capitalized - and that bank failures were so infrequent - that there was no need to collect the premiums.
So now,
the FDIC is asking for emergency powers to borrow up to $500 billion to take over failed banks.
To put this in perspective, the current borrowing limit is $30 billion. When the FDIC borrows money it borrows it from the United States Treasury. In other words, you and me.

At the end of December, the FDIC had $18.9 billion in its insurance fund. It is going to need a lot more if a bank nationalization program comes into effect.

It should now be obvious why their is a reluctance to nationalize banks. When, and if this occurs, it will become public that Congress was asleep at the wheel on this one. Or is the real answer lobbying? Did Congressmen receive money to pass the law that forced the FDIC to stop collecting premiums? Was that the real motivation?

Once again good sense is trumped by greed. Making the Congress dumb and the taxpayer dumber.

I'll leave you with this,

House Financial Services Committee chairman Barney Frank said that officials believed at the time that the good times would last and that bank failures would not be a problem.

"We had this period where we had no failures," the Massachusetts Democrat said in an interview yesterday. "The banks were saying, 'Don't charge us anything.' "

On yeah before I forget, Congress also decided to raise the amount insured in banks from $100,000 to $250,000. This was to increase confidence in the banking system. Never mind the insurance premium issue.

Are you feeling confident?

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

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